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Quest Means Business
Dow Tumbles; Global Risks Emerging; US Markets; European Markets Down; Argentina in Default; Ebola Outbreak; Still No Cure; Make, Create, Innovate: Fire-Fighting Robots
Aired July 31, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: It's a torrid day on the markets. The Dow Jones down the third-largest so far this year, both on points and percentages.
The market heavily down, no matter how hard he hits the gavel. It is Thursday, it's the 31st of July.
In tonight's program, the risks to the global economy. Argentina goes from debt crisis to default.
Also tonight, Europe enters the danger zone of deflation. All these spooking the New York market.
And we talk about Europe's biggest companies, now being hit by Russia's economic downturns. Sanctions are hurting.
I'm Richard Quest. It promises to be a very busy hour. And of course, I mean business.
Good evening. We start with news of just a few moments ago. A very sharp fall in the Dow Jones Industrials. The market, which had been down
for most of the session, took its final tumble as the bell was ringing, which you saw just seconds ago.
If you join me at the super screen, you'll see exactly what I'm talking about. The market opened lower, and it continued that fall right
the way through the session, closing down more than 1.75 points, a loss of 316 points. Both on percentage and on points -- on numbers, it is the
third-largest fall this year.
And if you're wondering why, and it looks like it was the lowest of the session, these are the world's hot spots. These are the risks that
we're going to be talking about tonight, that will give some perspective, give some insight, and perhaps show you why the market is so volatile, and
the risks that lie ahead.
We start, Argentina. Argentina in selective default. The country argues it's not in default, despite owing billions of dollars to
bondholders, but the ratings agencies, as you heard on this program last night, judging Argentina to be in selective default. That took its toll on
the market.
Then you have numbers from Europe. You have the potential of deflation in the eurozone, a flashing zone of worry and concern.
Frighteningly low inflation numbers from the European Commission, Eurostat, all of which has given cause for concern that Europe will fall into
deflation, regardless of what the ECB says and what more measures they need to take.
Then, you've go the next, of course, the questions of Russian sanctions. As the sanctions ratchet up from both EU and from the United
States, the standoff between Russia and the West intensifies. We're getting more results, more chief execs, more companies saying they will
either be directly impacted or they'll feel the full force as economies slow down. You'll hear that tonight.
Finally, and of course most, perhaps, seriously, in West Africa, the Ebola crisis, which has now claimed more than 700 lives. Do not be fooled
that it seems to be just on the western horn of Africa. This is a serious concern as people now worry about this transmitting itself to other
countries.
All-in-all, it means the Dow Jones fell 316 points. Alison Kosik is with me. Alison, what I find frightening about this is the market was
down, and that sped up towards the end. What happened?
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: You know what that is? It's the market literally rolling over at the end of the day. We've seen
this happen in the past, we've seen it, at least this year, happen twice this year for the Dow.
It was what you just explained. It was this combination of factors. And you know what? Investors have really been looking for an excuse to
sell. Now they've got the whole kitchen sink. But one thing that really stood out beyond what you said was in those jobless claims numbers.
QUEST: Ah!
KOSIK: Not the headline number of 23,000 more people filing for unemployment benefits last week. It was something else. There's another
indicator, there's an inflation indicator in that report that the Fed is known to look at. And what investors saw was that there was this big jump
in US labor costs. That's inflationary.
(CROSSTALK)
QUEST: This is hourly -- this is the amount of hourly work -- or not the hourly work. This is the amount people get paid per hour.
KOSIK: Well, OK. So, you make a good point. So, the good part is for Americans, it shows wages are increasing. That's good inflation for
many Americans. But it also showed that labor costs are increasing, and that is something that is worrisome to Wall Street.
QUEST: Frequently, that number only moves by a penny or two in any direction.
KOSIK: Right. This jumped by 0.7 percent. It was much more than expected.
QUEST: Right. So, we have a situation. Middle of the summer, which is a traditionally quiet area, sell in May, go away, as they used to say.
We have sanctions, we have deflation, we have Argentina, and we have this - - there's the caldron of inflation, perhaps, simmering up --
KOSIK: Right.
QUEST: -- somewhat. Does this volatility continue?
KOSIK: It very well could, because the fact is, we got this report showing inflationary pressure in the economy. Don't forget, we also got
that very good GDP report showing a 4 percent annual rate for the second quarter. That's inflationary, too.
Because what all this is leading up to is the worry that the Fed is going to go ahead and hike those interest rates earlier than expected, and
the worry is, is that people are questioning whether the economy is really ready for it so soon.
QUEST: OK. Argentina's default. Did anybody --
KOSIK: You know, I think it -- how one analyst put it was, the Argentinean situation was more of the straw that broke the camel's back.
It's not a contagion issue, but it was yet one more thing sort of thrown into that kitchen sink, all combined and rolled together, that made this
for so much going on and so much pressure on this market that you saw this kind of sell-off today.
QUEST: Alison Kosik, thank you for joining us.
KOSIK: Sure.
QUEST: Alison, appreciate that. Now, it was an equally dire day for European markets. If you take a look at this. Banco Espirito Santos, BES
shares were down 42 percent. Now, this was because the regulator in Portugal has said the bank is going to be forced to raise capital.
Why? Because of unexplained losses. There were things in the accounts that they hadn't seen before. Even though they'd gone through the
stress tests, what the regulator said is that there were more questions to answer and, crucially, they're questioning the former chief exec and chief
financial officer.
Adidas down 15 percent, the company announced the closure of Russian stores. Lufthansa's down 7 percent by a strike and falling ticket prices.
You're starting to get an idea of the business -- the business world is now responding very firmly to these other events happening elsewhere.
Now, let's start to Argentina. And in Argentina, the government has reacted with fury to declarations that the country is in default. Join me
at the super screen and you'll see what I'm talking about.
The word is default. Now, we may not think of it as default, and Argentina may not think of it as default, and you may not think of it as
default, because after all, this isn't a case of can't pay and won't pay. Well, maybe it's can't pay. Maybe it's won't pay. Doesn't really matter.
Argentina's got the money. It's been sent to the bank in New York, but it hasn't been allowed to be paid over because of what the judge said.
And despite frantic last-minute talks, officials failed to reach a deal with so-called holdout bondholders by the midnight payment deadline.
The Argentina officials called the holdouts "vultures" and say they will take their complaints to the Hague. The MERVAL index has fallen very
sharply. It fell 9 percent in Buenos Aires on Thursday.
The international swaps and derivatives association says it will review whether the default constitutes a so-called credit event that would
trigger insurance payouts to creditors.
Now, that's essential to understand. Because if CDSs are triggered, then you start getting the leverage effect through the wider economy. But
that will be up to the securities and derivatives.
The Argentine officials insist the country is not in default. The country's cabinet chief says the country has the money to pay, if only the
court in New York would allow it.
(BEGIN VIDEO CLIP)
JORGE CAPITANICH, ARGENTINA CABINET CHIEF (through translator): There has effectively been malpractice here by the judiciary in the United
States, and the responsibility falls on the three levels of its government. We have also observed the marked incompetence of the special master to
generate reasonable negotiation conditions, which is something Argentina has laid down in a very clear way.
(END VIDEO CLIP)
QUEST: Joining me now from Buenos Aires is Guillermo Nielsen, the former undersecretary of finance in Argentina. He led the country's debt
restructuring negotiations in 2005. Sir, good to see you. Thank you.
Let us not spend too much time debating whether it's a default or a selective default or not in default, because that's an issue for ratings
agencies. Let us talk about the effect now the country's been deemed in selective default.
GUILLERMO NIELSEN, FORMER ARGENTINE FINANCE MINISTER: Well, the effect -- the first big thing, I think, is going to be the macro-economic
management here in Argentina. We are heading towards a very tough second semester this year. Things were not looking well to begin with.
But indeed, you get a situation in which people are extremely worried, so there is a slump that is worsening by the day here in Argentina. It's
not falling apart, but it's going to be a gradual situation, in which two additional negative points are going to be added to this year's lack of
growth. So, we'll end up the year in around minus 3.5 percent decrease in GDP.
QUEST: Minus 3.5 percent at a time when other countries are growing is really dramatic and is very serious, and it raises the -- it raises the
legitimate question of the effect on Argentine society.
NIELSEN: Yes, indeed. Indeed because we are -- we estimate 3.5, but we are not very sure. If it suddenly goes, for example, to 4.5, 5 percent,
which it may, then we get a very complicated social situation. And also in turn, a very complicated political situation.
So, we all keep our fingers crossed and expect that this is not going to happen, but certainly, we have no major evidence of getting a limit to
the downside of this.
QUEST: And finally, the ability, now, for Argentina to reach some sort of deal, some sort of compromise that would allow to reverse this
process. Since Argentina's gone so far, has taken it to the edge and over, that seems unlikely.
NIELSEN: Yes. I think -- I see it myself as very unlikely. I think that the economic team is stubbornly opposed to this. And unfortunately,
in this team, we don't see anybody with the capacity as to read and communicate effectively to the market.
So, in that sense, I think it is extremely frustrating, what we are going through, because there is sort of no recognition to the fact that the
money is not there, and that we will get very easily into a situation of acceleration of the restructured bonds that could easily, at least on the
dimension of debt management, back to 2001.
QUEST: Mr. Nielsen, thank you for joining us and making sense of this. Please come back and help us understand this --
NIELSEN: Thank you.
QUEST: -- very difficult situation in the future. When we come back, we'll turn our attention to an equally if not more difficult situation, and
a health crisis with Ebola that even the experts say is going to get worse before it gets better. One of the risks, in a moment.
(COMMERCIAL BREAK)
QUEST: The deadliest outbreak of Ebola in history is getting worse. It's one of our risks that we're looking at tonight. In the best-case
scenario, it could take three to six months to stem the epidemic, according to the head of the US CDS, the Center for Disease Control.
The CDS -- CDC, I beg your pardon -- has issued a warning on Thursday, calling for all non-essential travel to affected countries to be stopped.
The World Health Organization says 729 people have now perished across four countries.
The total includes one man who died after traveling from Liberia to Nigeria. The Nigerian government is trying to locate all of those people
who came into contact with him.
You get an idea of the situation and the very much -- the idea of the ability to travel and then to move further on. I'm joined now by a senior
advisor to Nigeria's president, who joins me from Washington.
Sir, thank you for joining me and helping me understand, Mr. Ukupe. How -- the situation is serious, so I now need to understand what more
measures the Nigerian government is doing, both within the country, and in terms of travel to and from the country. Good evening.
DOYIN UKUPE, SENIOR ADVISOR TO NIGERIAN PRESIDENT: Thank you very much, Richard. It's a dual approach. Just as you mentioned, we had a
status breach. What I mean by that is that somebody who was infected traveled to Nigeria and died in Nigeria.
Before then hitherto, we had no real issues with Ebola. It was restricted to Sierra Leone, Liberia, and Guinea. But our approach is, one,
like you said, we've made contacts. As I'm sitting with you, we have made contact with the primary -- those who had primary contacts with that
person.
When I say primary contacts, I mean those who had physical contacts with him. And then, the other group, those ones who had physical contact
with him --
QUEST: Right.
UKUPE: -- are presently under quarantine. Now, the other group, who did not have really physical contacts but were in the vicinity, like they
were on the plane together, the government has also reached out to them, and they are under surveillance. So, we -- in that way, we are actually
controlling any possible problem from that end.
The other aspect of it is that we have -- because the only way -- since we don't have it inside, too, the only way we can have a problem is
if somebody comes from outside Nigeria.
QUEST: OK.
UKUPE: OK? And we've installed infrared heat detectors. We've started to do that, now, at our major entry points, particularly those that
are prone for entry by people from affected areas.
QUEST: Let me ask you sir --
UKUPE: So this way --
QUEST: Let me ask you, sir.
UKUPE: Yes.
QUEST: So, do you believe that you have contained and that there is no further cases resulting from the late Mr. Sawyer, who came through
Nigeria? Do you believe you can say categorically that there is no further outward infection?
UKUPE: What I can say, Richard, is that government has spread the dragnet to as far as possible, and we have involved -- we've utterly
involve the security agencies to track down people that were in the vicinity or that had contacts, like I said, direct or indirect contacts.
And we have taken charge of that situation --
QUEST: Now --
UKUPE: -- immediately, we've done that.
QUEST: Now, is it on the agenda that you will restrict travel, either land or via air, to affected countries? And effectively, you will say from
Nigeria's point of view, we need to quarantine ourselves against those countries?
UKUPE: A decision like that has not been taken. But I know that this will have to be something that will be on a regional -- at a regional
level.
Sierra Leone's president has already announced a state of emergency in Sierra Leone. Under a state of emergency, citizens lose their liberties.
But if there's no state of emergency, you can't stop movement of people. It's a free world.
But what we need to do, because we don't have a very serious threat, what we need to do is to ensure that at the point of entry, we're in
position to detect out and immediately if there's any sign to fish out people who may be infected and immediately isolate them, quarantine them,
and immediately, get them to help.
QUEST: Mr. Ukupe, thank you, sir, for joining us, being forthright, direct in our discussion tonight. I very much appreciate your time, sir.
UKUPE: Thank you.
QUEST: Now, the symptoms of Ebola may not show up for up to three weeks after being infected. Contagious air passengers could spread it
without their knowing. Take a look at this map.
The countries in red are currently fighting the vicious outbreak, we've just been talking about them, Guinea, Sierra Leone, Liberia. They
are right here.
But the countries in yellow, all the way up to the United Kingdom in the north, France and others, right the way through the Africa continent,
they receive weekly direct flights from the affected countries.
The risk of contracting Ebola while on a plane is, as the WHO says, extremely low, as the virus spreads through bodily fluids. But containing
the virus and curing it are two very different things. CNN's Will Ripley looks into why scientists still aren't close to finding a remedy.
(BEGIN VIDEOTAPE)
WILL RIPLEY, CNN INTERNATIONAL CORRESPONDENT (voice-over): Doctors in West Africa are fighting a losing battle. More than half of these patients
could be dead in days.
PETER PIOT, DISCOVERED EBOLA VIRUS: Tragic for the people who are dying from it, but it really destabilizes whole societies.
RIPLEY: Professor Peter Piot says hospitals are struggling, borders are closing, trade and commerce is grinding to a halt.
PIOT: An unprecedented outbreak.
RIPLEY: Piot co-discovered Ebola in Central Africa in 1976. Almost 40 years later, doctors still don't know how to prevent it or where it
lurks between epidemics.
PIOT: It came out of the blue in West Africa. We had no clue that it was circulating there.
RIPLEY (on camera): One leading theory is bats are carrying Ebola, possibly spreading the virus to other animals, and then to people. But
testing that theory is really difficult, because outbreaks are so rare, and there's very little market demand for a vaccine.
RIPLEY (voice-over): Money for research often comes from the government. Countries like the US worry Ebola could be used in a bio
terror attack. US studies have been promising. Piot says right now, real- world testing is what patients desperately need.
PIOT: We'll see whether we can offer that to people suffering from an infection when there's up to 90 percent mortality.
RIPLEY: The stakes have never been higher. For the first time, the virus is spreading across borders to populated areas.
PIOT: It's far more difficult to control an epidemic such as Ebola when you go into the big cities. Far more difficult to trace all the
contacts, isolate people.
RIPLEY: Until scientists find a cure, doctors will keep struggling as Ebola keeps killing.
Will Ripley, CNN, London.
(END VIDEOTAPE)
QUEST: When we return after the break, it's a giant fire-fighting, bomb-diffusing robot. We'll be over to Croatia and find out how one man
turned this disaster with this country of landmines into a million-dollar business. Make, Create, Innovate is next.
(COMMERCIAL BREAK)
QUEST: For the chief executive of DOK-ING family building business, his company into a multimillion-dollar business was always more than just
the bottom line. He builds unmanned tank-like robots that put out fires and can move unstable nuclear waste and can save lives. Nick Glass travels
to Zagreb in Croatia for this week's Make, Create, Innovate.
(BEGIN VIDEOTAPE)
NICK GLASS, CNN INTERNATIONAL CORRESPONDENT (voice-over): Imagine the dreaded scenario: explosions, a power in a nuclear power plant, or an oil
refinery. How to put out the blaze quickly and safely?
GLASS (on camera): Well, here in Croatia, they think they've found a heavyweight solution.
VJEKOSLAV MAJETIC, INVENTOR, MVF-5: We invented the new armored fire- fighting remote-controlled robotic vehicles.
GLASS (voice-over): Vjekoslav Majetic is a Croatian engineer with an expertise in transport, making things move by remote control, just like a
kid with a battery-controlled car. Except his machines are for saving lives.
It all began 20 years ago in 1994 with the end of the bloody Balkans War. Majetic set about helping clear his country of the terrible legacy of
landmines.
MAJETIC: I saw a lot of damage, a lot of wounded, a lot of dead people. For me, it was logical to make some tools to speed up the mining
and making much safety.
GLASS: A series of models developed by his family company, DOK-ING, because the market leader.
MAJETIC: After our machine, nobody using machines would be killed.
GLASS (on camera): Nobody dies?
MAJETIC: Nobody.
GLASS (voice-over): One thing led to another, and Majetic's expertise for remote-controlled robotics was called on by the Russian government.
But they wanted a fire-fighting machine that could go where no man could. The MVF-5 was born.
A gripper on the front to remove radioactive material or punch through walls. The thermal shield with special paint. It can handle up to 1500
degrees Celsius. And with seven cameras, it can be sent into a fire and maneuvered from over a kilometer away.
GLASS (on camera): It's a big machine, but the most important little tip is that.
MAJETIC: Of course. If you do not use this remote control, you have no control on the machine.
GLASS (voice-over): This is where they're built. Behind black screens, the production line bends, cuts, and welds sheets of reinforced
steel. They now produce three or four of them a month for a growing number of industries.
MAJETIC: The Russian use that machine to protect the nuclear power plant near Moscow. We have orders for Serbia, we have orders for
Macedonia.
GLASS: DOK-ING's turnover last year rose to over $40 million. But for its chief executive, its chief engineer, it's not just about profit.
MAJETIC: I'm so proud, for that's my product, and I'm playing all my life, that something was my dream, and I'm making my dream a reality.
(END VIDEOTAPE)
QUEST: After the break, we turn our attention to EU sanctions, which are targeting Russia's biggest banks. What's the view from Russia? How do
they see the sanctions and their effects?
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment. This is CNN, and on this network the news always comes
first.
U.N.'s top human rights official is warning of a possible war crimes in Gaza as casualties continue to rise. The Human Rights Commissioner
called for real accountability citing shelling of six U.S. schools in Gaza. U.N. has blamed Israel for the strikes. Israel says its military only
responded to fire and did not target the schools. Meanwhile, the Israeli Prime Minister Benjamin Netanyahu says his country will complete its goal
of destroying tunnels dug by Hamas, regardless of whether any cease-fire is in place. Mr. Netanyahu said that removing the tunnels was just the first
phase in the de-militarization of Hamas.
The U.S. Centers for Disease Control is warning against any non- essential travel to countries affected with Ebola. The head of the organization said it could take three to six months to stem the epidemic.
The World Health Organization says 729 people have died in Guinea, Liberia, Sierra Leone and one who traveled to Nigeria.
OSCE investigators have finally reached the Malaysian Airlines flight 17 crash site on Thursday. It's the first time in nearly a week. A
spokesman said the investigators conducted a rapid assessment. It's believed that as many as 80 victims may still lie in the rubble and amongst
the Eastern Ukrainian countryside.
Libya's Ministry of Health say at least 102 people have been killed in Tripoli over the past two weeks as fighting between militant groups has
escalated. Residents reported heavy fighting in the city's suburbs on Thursday. The violence began with an assault on Tripoli's international
airport back on July the 12th.
And U.S. stock markets have closed sharply low. The Dow was off 300 points. The S&P fell 2 percent. Investors are worried about sanctions on
Russia and how it affects the global economic recovery. We have the details - Europe has slapped Russia with sanctions that target the banking,
the oil and the arms industry. And of course, as you can see from the map, there is the sanctions, there's all the countries that are affected and
those are the risks that we are looking at today.
The sanctions are hitting Russia's biggest bank - Sberbank - which serves more than half of Russia's population. The E.U. countries won't be
able to invest in Sberbank anymore. And the U.S. sanctions didn't target Sberbank the first time, but now it's getting hit. The same applies to
VTV, Gazprombank, VEB, Russian Agricultural Bank. Now, to be true and to be fair, many of those banks - the Russian Agricultural for example - the
Gazprombank - many of them are domestic in nature and have few international obligations. But when it does - when they do - require
dollar financing or they do require dollars, then of course they have to go in the international markets.
The director general of Russia's International Affairs Council says he's not concerned about the short-term implications of the sanctions and
he compares them to having a cold shower.
(BEGIN VIDEOCLIP)
ANDREY KORTUNOV, DIRECTOR GENERAL, RUSSIAN INTERNATIONAL AFFAIRS COUNCIL: I would compare sanctions to a cold shower. It might be
sobering, it might mobilize you, people here might stop thinking about who change, how to change the economic system, how to be more inventive, how to
be more productive. But of course if you spend a whole day under the cold shower, you're likely to catch cold. So I'm not concerned about short-term
consequences. I think that the margin of safety is significant. Russia still has lot of resources, a lot of currency, a lot of opportunities to
diversify. But in a longer term, I think sanctions might have a very serious impact on the Russian economy and even on the Russian society.
QUEST: Explain. Explain why, because that method - that effect - on the Russian society could push Russia away from the West towards, say,
trying to get a prush (ph) more with China which would not be easy or a greater relationship with China, but certainly it would deal a death knell
to this post-Cold War love-in that has existed for many years between the U.S. and Russia.
KORTUNOV: I think that for many Russians - not for all of them, but for many Russians for many years, the overall perception was that Russian
is and will continue to be a part of the global society that integration is the way that Russia should follow, that Russia is a part of this family of
nations. And of course right now, it appears that this perception is shattered, that Russia might become a fortress - a shining city on the
hill, if you wish. A country which is not ready or is not willing or is not allowed to get integrated with most advanced economies of the world.
And with all due respect, it's hard to believe that, for example, bleaks (ph) can fully substitute the West as the main source of modern
technologies or for best practices, say, including social practices as a source of finances - as a source of economic and social standards.
QUEST: Finally, one thing has become extraordinarily clear in recent - in the last two weeks. The diametrically-opposed views on what happened
to MH17. Whether or not it was a Russian-supplied missile to the separatists, in the West there is no doubt. It's game, set and match, and
all they need now is somebody to be hauled off to the Hague, but the Russians see this very differently, don't they?
KORTUNOV: Oh, absolutely. I think that if you follow the official line in Moscow, the line is that the odds are that the plane was grounded
by either the Ukrainian army or someone associated with the Ukrainian army that the resistance in the east could not be held responsible for this act
and that Russia cannot be held responsible either. I think that definitely we have a very different picture in Moscow compared to what you get in the
West.
QUEST: What do you think happened?
KORTUNOV: Well, you know, frankly I think that we pay too much attention who pushed the button, because it's clear that the whole
situation in Ukraine when there are units and people who are accountable to nobody and who are loose cannons, this situation cannot and should not be
tolerated.
(END VIDEOCLIP)
QUEST: By now you're getting a very good idea and a good vision of the risks around the world that we are facing, whether it comes from
Argentina or from deflation or from Ebola or from sanctions. It doesn't matter which. The world is at a particularly dangerous moment and we're
seeing volatility now moving into stock markets with the Dow off. The Dow has now given back all the gains of the year so far. The Dow is just about
flat for the year. Let's talk about this now with Ken Rogoff, a Harvard University professor who joins me now. Ken, good to see you, sir. Thank
you for talking. Now, rarely do you and I get a chance to speak when we have so many potentially serious issues, all of which simmering, some
bubbling, on the stove at the same time.
KENNETH ROGOFF, Yes, well there's no question the geopolitical tensions have risen in recent months. And frankly it's been remarkable how
robust the markets have been to this until now - not just, you mentioned Russia, Argentina, Ebola, of course what's going on in the Middle East.
And the situation Russia is particularly disconcerting because it's not quite clear what the endgame of this is going to be. There are very strong
nationalist forces in Russia pressing President Putin to go further into the Ukraine.
QUEST: Right. And that's really the difficulty and the worry here, isn't it? Because in Argentina there's no obvious way out even though it
may be contained just through Argentina. We've still got deflation prospect in Europe. And as you rightly say, Ken, so in this - Russia it's
- who knows how that plays out? In this environment, does this volatility in the markets and this instability continue for the foreseeable?
ROGOFF: Oh I think it does. I think the fact is that the volatility has been stupefyingly low, almost like the markets are dead and it's waking
up to some of these risks around the world. Some people attribute it to the central banks just being so aggressive, keeping the world awash in
liquidity and somehow that's done it. But you know when you see these riffs of war break out, the Argentine thinks quite serious because it
ultimately could affect other countries. Ultimately I think we have to see a rise in volatility from where we've been.
QUEST: How much of what we are seeing is what one would describe as the normal agenda of planet earth in the sense that we have been distracted
by a global financial crisis, a recovery, high unemployment for the last four to five years. But actually, this is the sort of thing that the last
20, 30, 40 years has been the normal course of events, or are we seeing something different?
ROGOFF: Well, you know you're right, Richard, in some sense when we're talking about geopolitical risk is what the market is worried about.
I think for a long time that's been another way of saying, `They can't think of much to worry about.' So they're looking at the sort of outside
the box things. But, there's no question, if you look at the Middle East, if you look at Russia, there's some remarkable events. I mean, we've seen
the post-World War II borders moved for the first time, so I think that there's something more than that. Hopefully it will all stabilize out each
of the individual situations, at least outside the Middle East look to be things that could be settled but they're not settling any time soon.
QUEST: Ken Rogoff. Ken, good to see you, sir. Thank you for making sense and putting it into perspective. We appreciate it as always. Thank
you, sir.
ROGOFF: Thank you.
QUEST: Now, when we come back after the break, if you want to see just how far this goes - international companies are feeling the effects of
sanctions against Russia. We'll talk about that part of the story. "Quest Means Business" -- we're live in New York.
(COMMERCIAL BREAK)
QUEST: The evidence of what's happening with Russia and sanctions is now starting to build and you can't ignore it. As sanctions are walling
off the Russian economy, Western companies are saying they're feeling the effects. So, we're building up the wall to show you what we've seen so
far. We saw these earlier in the week, these later in the week. Now we have Adidas sportswear company saying a profit warning, citing exposure to
weak Russian markets. The shares were down more than 50 percent. Adidas also saying it is going to close off and going to shut some shops.
Anheuser-Busch which is the brewer that says the crisis is affecting the way -- the big business -- in a big way, the chief executive saying -
sorry, the chief financial officer, I do beg your pardon - says it's hard to tell when it will get better.
But not just in Russia but also on Eastern Ukraine - Eastern parts of Europe - beer sales are down. Siemens. Now, Siemens in the early part of
the crisis against Russia, they very much - and the Ukraine situation -- took a middle line. But now Siemens says tensions pose a serious risk for
growth. The chief executive of Diageo told me that measures against Russian have not directly impacted his business -- it's just 2 percent --
future sanctions could. The company's earnings for the second quarter were weaker than expected because of volatility in emerging markets. Ivan
Menezes joined me and I asked him about the company's Russian concern.
(BEGIN VIDEOCLIP)
IVAN MENEZES, CEO, DIAGEO: Russia is about 2 percent of our business and within it, are core franchises - largely in whiskey. Scotch whiskey,
Irish whiskey, some rum products. We have a very good business in Russia. It's been growing very nicely over the last few years. It slowed down a
bit in the last couple of quarters. We have commercial operations, sales teams, distribution networks in place, and clearly we have contingency
plans should things develop adversely further. However, our core business is an imported products business and we don't have huge operations or
assets on the ground other than our sales and commercial teams and our company -
QUEST: Right.
MENEZES: -- in Russian.
QUEST: There was one interesting - two interesting - paragraphs in your annual report. I want to just refer to them and get your thoughts on
it. You says - you says - you say the climate of public opinion has become more difficult. The role and purpose of corporations continues to be
questioned by government, interest groups and consumers. That's pretty fundamental, isn't it? It's people basically saying what use are public
companies for?
MENEZES: I think it's a very real debate in today's world, and one of the things that I'm passionate about - proud about - is we at Diageo take
very seriously our objective to become a highly-trusted and respected company. So when you look at our businesses around the world - in Africa,
for example - we are right in the communities in which we operate supporting sustainable agriculture, helping the tax base grow, be a good
employer, have very high environmental standards, be very transparent about what we do and most importantly in our business - really drive the
responsible drinking agenda.
QUEST: Do you want Diageo to be part of that debate - encouraging it obviously to your own advantage - but part of the debate? Or do you prefer
to be neutral and not get involved? I suppose I'm asking you do you want to play or watch on the debate about the role of corporations?
MENEZES: I think I'd like to lead by example and be one of the examples of where we can truly demonstrate that responsibly-run and
responsibly-led corporations - multinational corporations - have a very positive force in society. To me, that's something everyone at Diageo's
has a huge degree of passion for, and you will see it in the actions we take. I think there's enough debate and talk going on these days. It's
more time for action.
(END VIDEOCLIP)
QUEST: This is "Quest Means Business." We're back in a moment.
(COMMERCIAL BREAK)
QUEST: Now we'll talk more about the worsening situation with Ebola in Liberia. We're joined now by the president of Liberia, Ellen Johnson
Sirleaf, who joins me now via Skype. Madam President, thank you for joining us and thank you for giving us time in what I know is an extremely
busy moment for you. So, please bring me up to date with the situation in your country and what measures you're now taking.
ELLEN JOHNSON SIRLEAF, PRESIDENT OF LIBERIA: The situation is quite serious, coming close to being a catastrophe. We already have 300 persons
in Liberia under surveillance, we have 47 deaths, 28 health workers dead, and I daresay it may be even greater in some of our other neighboring
countries. This is very serious, it's a disease that is unknown to us, it's strange, it's deadly, there's no cure for it. Our people have at
first -- at - on the basis of no knowledge, resisted. The authorities deny today as people begin to die, we have - we are fearful -
QUEST: Right.
SIRLEAF: -- we are panicking, they are moving from one community to another.
QUEST: Right. Now the U.S. Centers for Disease Control says that this could - can - last for another three to six months. And even
yesterday on this program, the information minister for your country said it's likely to get worse before it gets better. So, Madam President, what
help do you need?
SIRLEAF: We need everything. We need preventive gear, we need ambulances. More importantly, we need human assistance. We need technical
assistance - doctors, nurses, experts that can train our own people as to how to deal with those who are sick, how we can encourage the preventive
measures we are already taken - and we've taken a lot of them. We've quarantined places, we've closed schools, we've closed our borders, we've
closed markets, we've done everything we can, but we've done is just not enough. What has happened in our sub region with our neighbors who have
done a lot is still not enough. This is an international crisis and I hope that the international community will respond to it in that kind.
QUEST: So, --
SIRLEAF: So we - go ahead, Richard.
QUEST: When you talk about these measures and you talk about the extraordinary - you've basically closed down the country which sort of
raises the issue what more then you do? Because short of telling people - short of basically saying, `Do not leave your homes, close down the cities'
- there's not much more you can do, is there?
SIRLEAF: Well, that those measures are necessary for containment. If we allow people to keep moving around from one community to another - and
this is a disease that you cannot tell right away until the symptoms show. And when the symptoms show, you probably have reached the point where you
cannot recover. That's how serious it is. So we have to hope very, very robustly on sensitization, on information, on being able to get our
communities to know they need to stay within their confines, enable us to reach to them, enable us to keep them from interacting, say, at a mass
gathering. This might be a very difficult imposition, it may be a restriction on their freedom, but this what will save their lives.
QUEST: And how much of the measures necessary are cultural? This idea of funerals, the laying on of hands, this idea of communities - how
much are you having to tell people culturally, look, you've going to have to behave differently because of the deadliest nature of this awful
disease?
SIRLEAF: We're getting that message across to them. In Liberia, we shake hands very frequently. We've said no handshaking, no touching, we
have some of our traditional practices relating to the burial of the dead. We say, we're sorry, you just can't bury your dead the old way - cannot
touch those bodies. They've got to be turned over to the health authorities who would say that they are properly disposed of so that they
do not represent a risk of somebody coming close to them. We've said no interaction. It's been a tough sell because people are accustomed to being
free and doing what they want to do. But right now, we're getting to them that they've got to be restricted, they've got to respect the laws, they've
got to respect the orders, and if they don't, we're going to have to impose it on them -
QUEST: Right.
SIRLEAF: -- for their own good.
QUEST: Madam President, a final question to you, ma'am , -- a personal question. Nobody comes into politics, nobody takes leadership to
have to watch their country be ravaged by the sense of disease. This must be heartbreaking.
SIRLEAF: It is heartbreaking, Richard, when we see people die. It's heartbreaking when we see people not in any position to be able to combat a
disease because it's a strange, unknown one for which there's no cure. But we have to provide that leadership, we have to be there with them, we have
to keep encouraging them. There's some success stories and we have to point that out to them that if you act early, if you go to the health
authorities quickly and you follow their instructions, you can save your life even though this is a deadly disease. My leadership role is to keep
selling that, to give them all the support they need and to make sure that our containment is effective so that we can begin to reverse this difficult
(inaudible).
QUEST: Madam President, thank you for joining us. I wish we were speaking under different circumstances, ma'am, but know that our viewers
and the viewers and the thoughts of the world are with you in this crisis that you face. Thank you, ma'am, for joining us tonight. And so, as we
come to the end of tonight's program, you get a view and a vision of the world and its situation. Whether it's in Russia with the sanctions,
whether it's Europe in deflation, down in Argentina and it's the question of default, or, as we've just heard, President Johnson - Madam President -
the terrible plight facing those in Liberia, Guinea and the other countries affected by Ebola.
And on top of it all, the prospect and maybe the volatility of a stock market going into a rout. The time when the gains have gone and now
everybody wonders what next. And that is "Quest Means Business" for tonight. I'm Richard Quest in New York. What's quite clear is that the
risks are many, the dangers are there and it's time to take care. Good night.
(END QUEST SHOW)
END
